Improving Security of Payment Building and Construction Industry
Improving Security of Payment Building and Construction Industry
Improving Security of Payment Building and Construction Industry
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10. Prequalification Page 124National Public Works Council Inc<strong>Improving</strong> <strong>Security</strong> <strong>of</strong> <strong>Payment</strong> in the <strong>Building</strong> <strong>and</strong> <strong>Construction</strong> <strong>Industry</strong>providing a report so that it takes into consideration all current information. Theability <strong>of</strong> CRAs to provide on comprehensive reports, particularly for smallerContractors, depends somewhat on the extent <strong>of</strong> co-operation <strong>and</strong> informationprovided by the Contractor itself <strong>and</strong> its suppliers.This <strong>of</strong>ten means that information for smaller companies/businesses is not verydetailed, except for noting any judgements effected against thecompany/business.10.5 An Effective Prequalification Process10.5.1 Current PracticeNo empirical evidence is readily available to establish the effectiveness <strong>of</strong> the existingprequalification practices undertaken within the <strong>Building</strong> <strong>and</strong> <strong>Construction</strong> <strong>Industry</strong>in Australia. However, research has been undertaken which generally supports that inorganisations with an appropriately structured risk assessment <strong>and</strong> risk managementsystem the organisation's exposure to those risks is reduced.Overall, the only level at which a full prequalification process is currently occurringin the construction chain is between the Principal <strong>and</strong> the Head Contractorpredominantly in the public sector. Realistically, this is most likely due to both therelative financial exposure <strong>of</strong> the Principal <strong>and</strong> the ability <strong>of</strong> it to comm<strong>and</strong> theinformation required to undertake such a process.Given the lack <strong>of</strong> empirical evidence upon which to base a risk assessment theselection <strong>of</strong> an "optimal" prequalification system must inevitably be based on asubjective assessment <strong>of</strong> relative risk. In this context it is more appropriate to focuson the fundamental aspects <strong>of</strong> a sound prequalification process rather than specificfinancial benchmarks. Where necessary, financial benchmarks based on ourunderst<strong>and</strong>ing <strong>of</strong> the industry, have been used to describe the prequalification process.Before universal implementation these benchmarks they should be further testedagainst appropriate empirical evidence.